Fair Pay Agreements – How will the Proposed System Work?

In early May the Government finally provided details regarding the proposed design of its Fair Pay Agreement system.  Here’s what we know so far…….

A Fair Pay Agreement  (FPA) will be a  legally-binding agreement that  will set out the minimum terms and conditions between employers and employees across entire sectors. An FPA will outline certain mandatory terms such as minimum wages, ordinary hours, overtime and penalty rates. Other topics must be discussed but don’t have to be agreed, these include health and safety, redundancy and leave. An FPA could allow for business exemptions if they  can demonstrate they are experiencing significant financial hardship.

There will be an FPA bargaining process with unions representing employees and employers will choose a representative who meets specified requirements. While contractors  are not currently included within the Fair Pay Agreement system, penalties will be applied where an employer tries to avoid FPA coverage by  misclassifying an employee as a contractor. The Government has indicated contractors will be included in future amendments

A union will be able to initiate an FPA process by meeting a representation threshold (either 10% or 1000 employees in a proposed sector or occupation) or pass a public interest threshold (i.e. where systematic employment issues exist in an industry or occupational group).  The union will get to decide what  work is included in the coverage of the FPA, but parties can later agree to change the coverage. Where there are two FPAs in place and there is an overlap for an employee, the second FPA only applies if the employee would be better off under its agreed terms and conditions.

During the FPA negotiations employees will receive direct updates from unions unless they opt out. Employers must allow employees to attend two paid, 2-hour meetings during the FPA bargaining process and unions will be able to visit workplaces on FPA business without needing an employer’s consent.

The Employment Relations Authority will need to review and vet an FPA to ensure it is lawful before a ratification vote is completed with both parties. If an agreement can’t be reached on an FPA or two ratification votes fail, the FPA will go to the Employment Relations Authority for determination.

The Government will be providing financial assistance of up to $50,000  for each side which can be used towards the cost of bargaining.  They will fund four FPAs per year and additional funding will be provided if a side has low rates of union or industry membership.

The Government is now drafting new legislation which will be released later this year and the public will be able to provide feedback during the Select Committee process.  The new FPA legislation is expected to pass in 2022 but there has been no clear indication of when this legislation will come into effect.